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H. Petitioners’ Financial Difficulties
Petitioners lost personal assets (totaling approximately
$2.5-$3 million), including their house, about the time when the
foreclosures upon the K-Mart, Indio, Cowan Avenue, and Avenida
Del Mar properties occurred. Petitioners’ cars were not
foreclosed upon. In 1988, petitioners moved to a rental house on
Balboa Island, California. Petitioners were unable to afford the
legal retainer fee to file for bankruptcy.
Petitioner-wife returned to teaching to supplement their
income, earning approximately $25,000 per year. Petitioner
returned to selling insurance. Petitioner earned approximately
$35,000-$50,000 in 1984-85, but his income increased to $75,000
by 1990.
I. Petitioners’ Tax Returns
Petitioners timely filed tax returns for all years in issue,
except taxable year 1995. For 1978 through 1999, respondent’s
records show that petitioners reported adjusted gross income as
follows:
Year1 Adjusted Gross Income
1978 $8,925
1979 -13,427
1980 -22,524
1981 -2,095
1982 -248,845
1983 None reported on return
1984 -151,306
1985 -240,661
1986 -106,772
1988 -0-
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